Governor is spot on: Housing market is holding London back

Allister Heath was Editor of City A.M. for six years up until June 2014.

Allister Heath

SPOT on. That is the only way to describe Mark Carney’s analysis of the woes of the UK housing market, which he attributes primarily to under-supply. I have my differences with the Governor on many issues, but it is excellent news that he has decided to throw his weight behind this issue.

We are getting more housebuilding at last but the numbers are still far too low; at least 15 years of constrained supply and a booming economy mean that we now need a sustained explosion in housebuilding to meet new demand, to allow the renewal of inadequate stock and to start to push prices down to a more sensible level again.

Figures from Estates Gazette’s London Residential Research released last week showed that housebuilders started construction on nearly 29,000 homes in 2013, up 42 per cent on the previous year, up 154 per cent on the credit crunch low of 2009, and up six per cent on the previous high of 2007. The London Borough of Greenwich in particular has emerged as a hotspot with almost 2,000 new builds getting under way last year (double 2012’s total) and 9,000 applications going through the planning pipeline.

Yet such figures are still insufficient. Years of under-supply and a booming population and economy mean that we need to see even more housebuilding in and around London, not just this year and next but for decades to come. The other problem is the kind of homes being built: almost all are flats, and yet there is huge demand for family homes, especially outside of central London. Carney is right: we need to build, build and build more.

TOP DESPITE PROPERTY PRICESCONGRATULATIONS, London: the capital has just been ranked the world’s top city by PwC, despite its overly costly house prices. It’s a stunning result, and just the latest in a growing number of surveys and pieces of research that demonstrate London’s astonishing resurgence after the financial crisis. Residents and commuters are well aware of the limitations of their city, of course, but rival centres – including New York, Shanghai and Paris – have other, even greater problems and lack London’s remarkable economic and cultural momentum.

Among PwC’s most interesting findings was that London has made significant progress when it comes to technological readiness, and now shares the top spot with Seoul. London finished second in broadband quality, ranked first in world university rankings and was the top urban gateway. It’s a great result – and imagine what London could achieve if it wasn’t being held back so much by its mad house prices.

DEAL FRENZYWHAT a Sunday. The frenzy of deals announced yesterday evening was reminiscent of the bubble days of 2006-07. First, we had Deutsche Bank’s €8bn fundraising from investors; then Pfizer’s fresh £55 a share bid for AstraZeneca; and then AT&T’s $48.5bn deal to buy DirecTV

As to Pfizer’s bid of £55 for AstraZeneca, the deal in this list that will be of most interest to the City, it is a very serious offer that deserves to be given close consideration by the board of the British firm. Its US suitor doesn’t want to launch a hostile bid, and will walk away if the offer isn’t accepted, though the phrasing of its email last night was as aggressive as it gets while remaining technically “friendly” (in the terminology of these sorts of deals, at least).

It seemed that AstraZeneca was planning to give the deal short shrift last night, as we report on p1. But it would be wrong to reject it too quickly. At the very least, AstraZeneca should spend a few days discussing the bid with its shareholders to gauge their views before it makes up its mind. Companies are owned by their investors, not their directors; and CEOs and boards who forget this do so at their peril. It’s always best to talk.